Ex-BBC director: ‘Swap licence fee for household fee’
January 24, 2022
By Colin Mann
James Purnell, a former Director of Radio at the BBC, as well as its Director of Strategy and Digital, has suggested that the Corporation be funded by a household fee, also proposing that the BBC buy fellow public service broadcaster Chanel 4, whose future ownership is being considered by the Government.
Writing in the Sunday Times, Purnell, who served as Secretary of State for Culture, Media and Sport between 2007 and 2009, noted the announcement that the licence fee will be frozen for the next two years and then indexed to inflation for the next four, following current Culture Secretary Nadine Dorries’ tweet that “this licence-fee settlement will be the last” and that it was time to discuss new ways of funding “great British content”.
“There’s nothing wrong with reviewing options for funding the BBC,” asserts Purnell. “In retrospect, that would have been helpful preparation for the last charter review. In that negotiation, we at the BBC proposed moving from a licence fee — where everyone who watches television has to pay — to a household fee, as was being introduced in Germany. It’s an interesting alternative. Every household pays the fee. Those on benefits can apply for an exemption. Companies have to pay, with bigger companies paying more. Public services pay, whether universities or schools” he explains, suggesting that the BBC thought that would be simpler to administer and explain.
“In the end, [then Chancellor of the Exchequer] George Osborne vetoed the household fee, fearing it would look like a poll tax. But for the next charter review, likely to start in 2026, it would help to have a range of funding options from which to choose,” he states. “What can’t be done is to settle the funding method before we’ve chosen what kind of BBC we want, and we can’t do that before deciding what kind of media we want,” he adds.
“The UK media market isn’t perfect, but it is better than most,” he contends. “It is an ecosystem — with public service broadcasters competing with regulated commercial television and radio and lightly regulated newspapers and effectively unregulated social media. Usually, the ecosystem self-corrects. Online disinformation can be rebutted at scale by broadcasters and newspapers. Newspapers can publish investigations that broadcasters shy away from. It is harder for public figures to lie in the UK because one of the outlets will find you out and they will tell millions of people. The survival of the shameless is harder here, although not impossible.”
“The BBC is smaller than it was but still central to our lives. When educational content becomes scarce on other channels, the BBC is the provider of last resort. When it becomes harder to fund global newsgathering, the BBC can step in. In many towns, the BBC is the last local newsroom,” he notes.
“The American media market could be our future. With streaming growing in the UK, we need to choose whether we want it to replace our national media, or complement it,” he suggests.
Purnell would set three key tests for our future media. Does the media market fund programmes about Britain, about our lives, in all our diversity? Does it support our democracy? And does the intellectual property stay in the UK, in all its regions, or do we become producers for hire to US IP-owners?
“Global streaming services produce great content,” he admits. “But they make hundreds of hours of new British TV content each year, compared with 22,000 hours from the BBC. If we just have a Netflix subscription, we will never see ourselves and all the stories of our country on screen.”
According to Purnell, critics of the licence fee say it is an anachronism, but the real question is whether public service broadcasting is more or less needed than in the past? “I would argue that we will need more investment in British content and more intervention to make sure the decisions about our media are made in the UK. And when public service broadcasters invest in content, the IP stays in the UK, a major driver of the economy in Salford, Glasgow, Bristol, Cardiff.”
As to how that can be achieved, first, Purnell says we need a national debate about what kind of media we want. “That should include the future of the BBC, but also a deeper debate about the role of social media and how we generate investment in content, from newspapers to commercial radio. The next charter review will happen after the next election, probably in 2026. That election will be the most momentous for public service broadcasting in our history. We need the political parties to say what their plans for the BBC are, so that voters can decide as a country what we want its future to be.”
Second, the BBC needs to reform itself. “The lesson of Brexit and indeed of the current debate about Channel 4 is that you can’t come up with proposals at the end of the process. The BBC and its supporters need to engage with those who have ideas, criticisms, ambitions for our media, to create a BBC that has indisputable public support by the time the next charter review starts.”
“[BBC Director General] Tim Davie is right to talk about providing value to all households. If too many young people never use the BBC, that’s a threat to charter renewal. One radical option would be to merge Channel 4 and the BBC. In a world where even Rupert Murdoch decided he didn’t have enough scale, having two public service broadcasters is a luxury,” he contends.
“Channel 4 makes wonderful programmes, but it struggles to get them noticed — with many viewers only discovering them when they arrive on Netflix. Rather than privatising Channel 4, BBC Studios could be allowed to ‘buy’ it, merging it into UKTV, which the BBC already owns, but underpinning it from the licence fee,” he proposes. “Channel 4 needs to be able to take risks, but my colleagues who worked there say they always feared ending up the year in the red. The licence fee could be used to manage that risk — and in return the BBC could use those services to reach younger viewers,” he advises.
He accepts that providing more value won’t be enough. “The argument for the BBC needs to be more like the argument for the NHS. Not everyone uses it every day. Not every experience is perfect. But we love it and would fight to defend it. The argument for the BBC needs to shift from value to purpose — that we need it because it makes our democracy better and us happier,” he declares.
“That purpose is simple: improving the country’s well-being. That means Strictly and [Radio 2 presenter] Ken Bruce. “But it will require fewer programmes than in the past — the BBC is still too focused on filling schedules, spreading its investment too thinly. Increasingly, programmes will need to be essential, rather than pervasive.”
“That will mean investing in services no one else does — in education, for example, the BBC could offer an Open School, as it once helped create the Open University, building on its success with Bitesize during the pandemic. Online learning is here to stay, but it needs a core of great content, freely available to make sure that all children and schools benefit. Otherwise, it will be private schools and the children of rich parents who benefit,” he warns.
“It will mean accelerating the transition to digital. The BBC pioneered video-on-demand — with Reed Hastings, the founder of Netflix, saying that the iPlayer paved the way. At the BBC, I led the team that launched BBC Sounds, which now reaches 3.5 million people per week and puts BBC radio on our era’s essential device, the mobile phone. The BBC’s online services are already important, reaching 33 million people per week,” he notes.
Having left the BBC, he says he has noticed two things. “First that the BBC still has a broadcast mindset — the world is now online-first and the BBC finds it hard to shift its mental model. It may be inconvenient for an organisation whose strength and highest consumption is in channels and apps, but consumers now live online and on social media. If the BBC wants to fulfil its public purpose of improving our wellbeing it needs to shape social media for the better, not just use it as a promotional route to iPlayer and Sounds.”
“The second thing I’ve noticed is the impact of years of cuts. It makes the BBC slightly miserable. The BBC is very good at making cuts — probably better than any other organisation I’ve worked in, including central government,” he admits. “But making cuts year after year is depressing. It makes the place less creative — because to fund your new idea, you have to stop someone else’s.”
“So if we want the BBC to shape our media future for the better, its income will have to grow,” he asserts. “We therefore turn last, as should the charter review process, to how to fund that universal, high-quality, UK-wide BBC. Subscription won’t do it. The BBC could run a successful television subscription business, but by definition it wouldn’t reach everyone any more. It couldn’t bring the nation together. The programmes would change too — the BBC would make more commercial programmes, and focus on better-off consumers who could afford to pay. Nor could subscription fund national radio, the BBC’s global newsgathering or its local services,” he adds.
“Adverts aren’t a good idea either. Some foreign public service broadcasters take adverts, but in the UK we use advertising revenue to fund ITV, Channel 4 and Channel 5. Putting adverts on the BBC would just take money away from those other broadcasters. We need a funding mechanism that increases investment in UK content, which this wouldn’t do. Plus audiences would hate it — every survey I saw on this found that no adverts was one of the things audiences like about the BBC,” he notes.
“Some countries fund their broadcaster out of general taxation. Denmark introduced this recently, but it also led to deep cuts at DR, the makers of Borgen, The Killing and The Bridge. Crucially, it would expose the BBC to greater political pressure,” he warns.
“If we want a universal, high-quality BBC, then the funding review is likely to come back to some kind of universal payment. Yes, we can’t keep linking the licence fee to watching television. Not only is that becoming harder to enforce, it also feels increasingly out of step with a BBC that reaches 33 million people online every week, and offers the world’s best radio services: local, national and global.”
“But that’s a technical fix. The structure of the licence fee continues to have virtues. It means everyone can access the BBC — 99 per cent of households do so every week. And it underpins the BBC’s values and creativity — because everyone pays, BBC staff feel a deep obligation to serve everyone, which wouldn’t happen under other models. And it gives them the creative space to think about what programmes the country needs, not just what we think we want.”
“So that takes me back to a household fee. The BBC would still be for everyone. The BBC would be more insulated from political pressure. It would create the right incentives for programme-makers.”
“If we introduce a household fee, it should be progressive — cheap or free for poorer households. The BBC has already accepted that principle — since the licence fee is means-tested for those over 75. That should apply to all ages. This licence-fee deal is better than the BBC might have feared, but less than it needs. The BBC has already had 30 per cent real-terms cuts over the past ten years. But any politician will recoil at increasing the licence fee faster than inflation. In the past, the BBC benefited from household growth, allowing its income to rise faster than the level of the licence fee. The German system might open that option, bringing more companies and public services into payment, although that would be controversial,” he accepts. “Making the fee progressive might open another route. A progressive household fee could rise faster than inflation because poorer households would be protected.”
“But even that may not be enough to fund the media market we want,” he warns. “Broadcast advertising revenue is likely to decline, the forces of streaming may mean more of the investment comes from US-owned companies. We can’t cut the BBC’s income forever and expect it to remain world class. The funding review should investigate top-ups to the household fee, whether a levy on streamers or platforms, or some other mechanism,” he suggests.
“Finally, last weekend’s events show that we need to legislate to introduce checks and balances into the charter renewal negotiation. One of the politicians running the last charter review once told me that they couldn’t believe how much power they had over the BBC’s future, and how few checks they faced.”
“Previous governments wouldn’t have tied the licence-fee settlement to a demand for impartiality. I’m sure the government feel those points strongly — but they should be made by the party chairman or the press team, not those who lead on broadcasting policy. By so doing, they undermine their own case and strengthen the argument for an independent element to setting the BBC’s income and charter.”
“At the very least, the panel to review funding options needs to be set up credibly, with a chairman chosen by someone other than the government — possibly Ofcom — and deep and genuine public involvement,” he states.